Lynas Corporation for dummies (and Australians)

I do not need to write a ‘for dummies’ guide for Malaysians. They have made up their minds about Lynas and are now quite knowledgeable about the issues. They have learned more about rare earth and radioactive thorium than many of us will ever learn in a life time and they want Lynas out of their country.

Instead, I write this for Australians for whom media coverage of this story has been sparse. It is difficult to work out why the media have paid scant attention to this story. I would have thought that this was a story made for journalists.

This story involves our relationship with Malaysia. Considering that Malaysia is one of our closest neighbours and a country whose cooperation we vigorously strive for, I would have thought that an issue like Lynas should be big news in Australia.

Sure, this might not be a diplomatic row between political leaders. Our Prime Minister is not calling theirs ‘recalcitrant’ and theirs is not threatening trade sanctions.

And of course, this story does not involve asylum seekers.

No, this is different!

While our respective Prime Ministers get along nicely and make funny deals like swapping refugees, a whole country, 28 million Malaysians, are starting to feel anger towards Australia.

In this modern age, bilateral relationships between two Prime Ministers are not nearly as important as the relationship between a body of 23 million people and another body of 28 million.

Australians are becoming quietly hated by Malaysians and nobody thought to tell Australians of this?

This story also involves the crucial ingredients to some of the most important high tech inventions that we have come to rely on in the 21st century. If Lynas fail to get their product to markets, the price of iPhones, iPads, hybrid cars and wind turbines will increase across the globe.

This story involves a three way trade battle between Australia, Malaysia and China.

Most importantly, this story may involve a change of government in Malaysia– for the first time in 50 years.

Dear Australians,

Let me tell you about a company called Lynas.

Lynas is a mining company based out of Sydney. Their main mining tenement is at Mt. Weld, Western Australia, just 30km north of Laverton.

Their business model consists of digging these rare earth ores from the ground at Mt. Weld, processing them up a bit at Laverton and then trucking them to Fremantle before shipping them off to Kuantan on the east coast of the Malaysian peninsular. In Kuantan, they will further process their rare earth ore into rare earth oxides. Then they will make billions selling these oxides to buyers in America, Japan, France and China.

Your view of Lynas largely swings on your view of why Lynas made the decision to process these minerals in Malaysia rather than Australia.

It’s about the money!

It is cheaper for Lynas to operate in Malaysia than in Australia. Lynas knows that they will make more money for their shareholders if they operate in Malaysia rather than in Australia. Furthermore, Malaysia has a particular comparative advantage.

The disagreement between Lynas and those that oppose them stems from the source of this comparative advantage.

Lynas states that they built their Lynas Advanced Materials Plant (LAMP) in Kuantan because of the availability of cheap skilled and unskilled labour, chemicals and fresh water. This may all be true, but it seems fanciful to me that this would be the main motivating factor for putting this plant in Malaysia rather than in Australia.

To understand why Malaysia is such an attractive destination for Lynas, one has to understand some important differences between Australia and Malaysia – beyond the difference in the cost of inputs.

The United Malays National Organisation (UMNO), the ruling party in Malaysia has ruled for over fifty years. Nominally democratic, elections in Malaysia are ugly affairs, routinely tarnished by allegations of vote rigging, voter intimidation and strict control of the media by the Government among many other issues.

This is where Malaysia’s actual comparative advantage lies in heavy industries such as the processing of rare earth.

Without question, the processing of rare earth pollutes. Massive quantities of super heated sulphuric acid are required to separate the rare earth elements from the rubbish elements they are found with under the ground.

In California, rare earth miner Molycorp was shut down in the late 1990’s after it was found out by government regulators that tons of radioactive tailings spilled out into the California desert many times over a number of years.

In the northern region of China, rare earth processing has done untold damage to the livelihood of farmers and local residents. Much of the truth of what has happened in China will probably never be told.

In Malaysia itself, Japanese company Mitsubishi processed rare earth in the 1980’s and early 1990’s. Their shoddy operation is believed by public health experts to have done untold damage to a whole generation of Malaysian children in the area, some born with shocking birth defects and others contracting childhood leukaemia at five times the national average.

It is hard to think of an industry in more desperate need of democratic oversight. The rare earth industry needs to be monitored by bodies that source their authority from the very people that stand to lose the most if things go wrong.

The Malaysian Government does not represent the people of Malaysia. They represent the vested interests of big business. They represent the 1% of Malaysians that can afford to flee the country should it ever become necessary.

The problem is that democratic oversight is expensive.

If Lynas were to conduct their operations in Australia, or any other country with a strong democratic tradition, they would be required to negotiate with the local communities. They would be required to present an argument to the voters that their presence brings benefits that outweigh the inherent, undeniable risks in processing rare earth. They would be required by largely incorruptible public servants to adhere to stringent public health and safety regulations that reduce the risks to the public, down to the lowest level possible.

This is not the case in Malaysia.

The Malaysian public did not even find out about Lynas operations in Pahang until the construction of LAMP was almost finished. They read about it in the New York Times.

Access to official documentation surrounding the licensing scheme is a big farce.

Whistle-blower engineers working on the project tell of appalling breaches of basic standards in the construction while UMNO politicians seek to sow discord in the community claiming that Malaysians opposed to the Lynas plant are seeking to assist the rare earth industry in China.

These materials will eventually come to market. Somewhere in the world, these materials will be processed and then turned into iPhones, hybrid cars and wind turbines. This environmental activist accepts that as inevitable.

However it should not happen in Malaysia where the institutions are not mature enough to deal with opportunists like Lynas Corporation. More than skilled labour, fresh water or sulphuric acid, it is democratic oversight that makes doing business more expensive in Australia for Lynas. This is where Malaysia has its comparative advantage.

However, the decision by the Malaysian Government to go ahead in the processing of dangerous chemicals is one that its voters will one day seek to disown.

That day may come sooner rather than later.

Lynas have now been granted a temporary operating license and the likelihood now that UMNO politicians will do anything to prevent Lynas from operating seems remote.

All eyes now are on the general election due no later than April 2013. If the results of those elections are much the same as the last 50 years, Lynas will go ahead in Pahang. However it is by no means a sure thing. At the 2008 general election, Pakatan Rakyat, led by the enigmatic Anwar Ibrahim, made unprecedented progress toward establishing a genuine two coalition democracy.

Certainly the opposition has made great headway on the back of the Lynas issue. A nationwide rally held months ago brought tens of thousands of people out onto the streets in protest. In a country where streets protests are typically met with riot police eagerly wielding batons and tear gas, the numbers present at those protests indicate significant public discontent at the way in which the Malaysian Government have handled this Lynas matter.

Will Putrajaya (the administrative capital) fall to the opposition?

It is certainly possible.

Since an Australian mining company may have a hand in this, perhaps it is time that the Australian media started to look at this story more closely.

20 Responses

syabas!
a clear and concise explanation about Lynas and why Australians should care about this issue for the sake of both countries.
but given how many Australians support mining billionaires and their spokesmen like Tony Abbott, who cares what happens in Malaysia when cheap Bali holidays are still on tap?

I love people like Ryan who just love complaining about their iPhone bills on twitter, making YouTube vids, blogs like this one on their computers, making animations apparently as a job………………… hes one of the biggest rare earth users you will ever meet.

BTW I’m not even going to comment about the lack of real facts in the article itself.

“Certainly the opposition has made great headway on the back of the Lynas issue” LOL – Fuziah Salleh and the PKR guys CREATED the “Lynas issue” issue and then ‘backed’ the resulting protesters!! LOL again!! the poor trusting protesters were force-fed MISinformation supplied to them by “others” (PKR/PR and their ‘shills’). Everyone used their tonnes of rare earth enabled digital A/V equipment – rare earth sourced from stinky ancient carelessly toxic and polluting Chinese factories to protest. Protest against the reality of a modern state-of- the- art responsibly managed and yes! well monitored plant like LAMP which uses unique Mt Weld ULTRA LOW rad ore (not monazite!) and where peoples safety has been designed into it from the ground up as a top priority! It ain’t no Bukit Merah – humans and their processes DO evolve you know! btw apart from from that ambitious ego-tripping Fuziah Salleh, YOU were one of the misinformants that scared and stressed the young and old “rakyat” of Kuantan sleepless with your Youtubed lies and ERSATZ “facts”/science. Congrats, it’s gonna be fun to watch the HAVOC!! you’ve definitely helped cause . ps my Malysian Insider comment on your political rant is rather neutered cuz as you probably know your beloved ‘M.I’ consistently and repeatedly REFUSES TO POST any dissenting opinions or positive SCIENTIFIC FACTS ON LYNAS! (and not just from me) – but hey, that would be real cool with you wouldn’t it? Nice ideology you subscribe to.

The worldwide average for leukemia deaths per year is 8 persons per 100,000. So if 7 persons out of 11,000 have died of leukemia in Bukit Merah in the last 30 years, it means the town of Bhukit Merah is 3 times healthier than the world’s average. Mr. Albrey, do you know that the most successful cure for leukemia is extreme radiation of the spine to kill the marrow followed by a compatible bone marrow graft? It is obvious to me that the malaysian green movement fabricates lies about radiation and cancer to fan more fear to get more political power.

Lynas apologists and the Malaysian government want Malaysians and Aussies to believe that all the safety measures hv been put in place in Kuantan and the plant does not pose any health risks to the locals. The same crap is regurgigated by the same people each time an article on the Lynas issue is published. May I suggest you guys take off your rose-tinted shades and find out about the rampant corruption and the rotten political system in Malaysia before commenting. Assurances by the government or Lynas in such an envirionment have to be taken with a handful of salt.
We in Malaysia want iron-clad guarantees, but these are not forthcoming. I’m sure the Aussies would seek similar guarantees if such a plant were to be operating down under.
It’s only fair dinkum to say that when in doubt, leave it out … or take it back to your own backyard. NIMBY?

We didn’t realize that there are still people around that can be so insensitive. If James Bailey had not made specific comments on Bukit Merah, I guess we can still go on guessing about Lynas Gebeng project since the jury is still out. However, when Mr. Bailey’s comments are specific, targeting the victims of Bukit Merah, we can make an inform judgement. Either, he represents the Australian mining industry, specifically Lynas or he is just another heartless… Its like telling the Bhopal victims that Union Carbide was helping them cure their insomia or that the Minamata victims were victims of the fish they ate (ie. the fish killed them) …

Mr. Albrey in his comment about Molycorp’s Mountain Pass mine and processing plant failed to mention that Molycorp has restarted the mine and is almost complete with a new processing plant that meets all environmental regulations.

Mr. Albrey’s campaign against the LAMP project is actually counterproductive in stopping the problem of rare earth processing pollution in China. Virtually all the old polluting plants outside China have been shut down due to a combination of the low cost of the China plants (because the don’t have to meet any environmental regulations) and local environmental regulations they could not meet.

Now that technology is available to process the rare earth ore without the problems of the past, the only way to break China’s monopoly is to allow new clean plants to be built and at the same time, restrict usage of the rare earth products that come pollution producing plant in China.

Mr. Albrey’s concern for the potential pollution problems with a rate earth processing facility are well founded, but instead of trying to stop the plant and using the fear of problems caused by older, less clean technology, he should focus on making sure the Malaysian authorities use their regulatory powers to make sure the plant is built correctly and run cleanly. But that is not near as sexy as showing pictures of a decades old plant and scaring people into thinking the same thing will happen in Kuantan.

The world needs these rare earth minerals, of that there is no doubt. What needs to been done is to support the building of new, clean plants, support close regulation of their operators, and campaign to close the remaining old dirty ones, all of which happen to be located in China.

“But that is not near as sexy as showing pictures of a decades old plant and scaring people into thinking the same thing will happen in Kuantan” – John Smith.

Mahatir’s dictum of the 80’s up till the early 90’s for ravaging the Borneo jungles was that the First World would never reached where they are today if they had not gone through the same processes of polluting, poisoning their own people first. Therefore, the Third world should be left to their own devices to chart their path out of the Third world… ie. the means justifies the ends…

When you speak to the Penans and Orang Ulu (Kelabits, Kayans, Kenyahs, Lun Bawang) and when we see “pictures” of dessimated virgin jungle vital not only for Malaysians but the global community as a whole, its shocks us to see Mr. Smith & Mr. Bailey who are representative of the First World order (who Mahatir speaks about)make such casual statements. (Sorry Mr. Albrey, the brush isn’t meant to take even a broader sweep!)

So, as a Malaysian, I can say that unfortunately business is as usual… nothing has changed since Bukit Merah. We may have one of the tallest buildings and a modern metropolis as capital but the Third world mentality of doing business as usual is still ingrained there. Safety measures will not be there nor maintained. They will leave that to Lynas, like they left it to the experts in Bukit Merah – Mitsubishi. So, if the company seeks to cut corners to earn more, ” let the buyer beware.”

Usual arguments is that Lynas & the Australian mining industry must break China’s hold on the rare earth business. I think First World experts should get real since 80% of Australia’s mining industry relies heavily on China (including Brazil, Canada and the list goes on..) If it was not so, Australia’s economy would have gone down the tubes like the rest of the First World Club. Do we presume that Lynas will not sell to China? But should we say, Lynas will sell to the highest bidder (ie. US, Japan or Korea?) not lesser than China’s prevaling prices. So Lynas isn’t Messanic in their mission unfortunately.

Lastly, ample water supply is another reason the plant is located in Gebeng. I’m not sure which planet these getlemen are from since they have no accesses to news on global situations. Water is the planet’s future and to have waste by-products both in the soil and Malaysian rivers, doesn’t gel.

Therefore, if Lynas (or First World proponents) want to kick the ass of China’s monopoly, do it from Australia where the punch will hit harder unless they don’t want to piss off their own voters.

Mr. Smith, therefore pictures tell us a thousand words since those photos speak about real people, real families, real situations, not just names on a list or statistics that you wish they were.

PS. At least US has guts to re-start Molycorp’s operations and on their own turf. At least they have put their money where their mouth is..

This author is a-political having no faith in politicians and the political system but only recognises the axiom between cooperate greed and colluding governments.

Well said Ryan and we need many people like you to voice out. Since we talk so much about democracy why not the politicians let the people in the vicinity to decide and the best is to go a yes and no vote….

There is a simple solution for the supporters of “a rare earth” plant. Just build it in Australia, then all the protest in Malaysia goes away. So you guys can stop bitching and moaning about Malaysians protestors wanting to use mordern electronics and not wanting a “rare earth” plant. You want its so much and you think it is so safe.. build it in Australia. What’s your issue? High paying jobs as bonus too!

I am delighted that you wrote this excellent piece Ryan as we really need more Australians to enagage in what Lynas are proposing to do in Malaysia. Fuziah Salleh is one of the few MPs who is doing a great job representing her constituents who clearly don’t want a rare earth processing plant in their backyard.

The people like Justdafactz who seem fit to accuse her of ‘inventing’ the risks posed by rare earth processing are either very ill informed or have a vested interest in the project going ahead.

If – as is widely believed by most Malaysians – substantial amounts of money have already exchanged hands to make sure that this project goes ahead, it’s going to be very difficult to stop it from here.
We need all the help we can get from all of you in Western Australia in particular. It’s imperative that the first shipment never leaves Freemantle.

Some considerations spring to mind:
1) Chinese intelligence agencies are very active in SE Asia, the Pacific region and also very much in Australia
2) China currently has a monopoly on the refining of rare earth metals
3) Rare earth metals are used in new military technology – they are a strategic resource
3) It is in China’s best interest to stop Lynas

“The Malaysian public did not even find out about Lynas operations in Pahang until the construction of LAMP was almost finished. They read about it in the New York Times.”

You can not be serious!! Do you honestly take people of sound mind and judgment as fools with this statement?

How large is this project?
It’s being built in a designated industrial area of Kuantan!
Surely a project of this size wouldn’t of gone un-noticed!
I have friends in kL that new about the project months in the build!!!